The decision was made after a rare visit by special envoy Xie Xiaoyan, the former Chinese Ambassador to Iran, in March. In addition, the Chinese military delegation to Syria, which was headed by Chinese rear admiral Guan Youfei, the Director of International Cooperation at the Central Military Commission, met with the Syrian Vice Prime Minister, Fahd Jassem al-Freij, and the Syrian Minister of Defense.

“They reached consensus on enhancing personnel training, and Chinese military offering humanitarian aid to Syria,” said a report by Xinhua news agency.

According to the South China Post, “Guan also met Lieutenant General Sergei Chvarkov, chief of the Russian centre for reconciliation of opposing sides in Syria on Monday.”

China sets to benefit by an end to the Syrian crisis or at least the ability of the Syrian government to continue to attrite terrorists fighting on its territory due to its concerns over the Uighur element fighting not only in Syria but also in Chinese territory.

Uighur separatists have long been fighting for “independence” from the oppressive Chinese government. However, the Uighurs are themselves fanatical in nature and maintain ties to Turkey’s Grey Wolves terrorist organization as well as NATO’s Operation Gladio.

Regardless, Chinese cooperation with Syria is no doubt welcomed by the Syrian government that is currently mopping up terrorists all across the country but can still use all the help it can get.

The failed Turkish coup. The Nice attack. The RNC and DNC. There is no shortage of headline-grabbing news stories to keep you occupied during this summer of rage.

But while your attention is elsewhere, huge moves are afoot in the Asia-Pacific. Specifically, those moves are afoot in the South China Sea, where the Permanent Court of Arbitration handed down a long-awaited ruling last week in favor of the Philippines in their long-running dispute over territorial waters with China. The court, operating under the arbitration provisions of the United Nations Convention on the Law of the Sea, ruled that China does not have “historical rights” to the waters in question and that their reclamation activity in the area has already caused irreparable environmental damage and should stop immediately. China promptly rejected the ruling exactly as they said they would.

This might sound like dry, legalistic stuff, but it’s not. This dispute is a window into the simmering tensions that are ready to boil over in the region if and when the US makes its long-awaited, much-ballyhooed “Asia-Pacific pivot” (i.e. when Clinton is inaugurated by the voting machines this November).

To get an idea where this is all headed, just ask Dennis Blair. He’s the former Director of National Intelligence and retired Navy admiral who just told a Congressional committee that the US needs to be ready for a military confrontation with China over this dispute. That’s bold talk in the realm of diplomacy, where people like Hillary campaign advisor Kurt Campbell usually opine mealy-mouthed political doublespeak like “I think over time China will start to adjust its position, because they will realize it’s not in their best strategic interests.”

The real question here is what, precisely, will trigger the US-Philippines Mutual Defense Treaty, which calls for a military response to any armed attack “on the island territories under [each member’s] jurisdiction in the Pacific or on its armed forces, public vessels or aircraft in the Pacific.” Will the Philippines invoke the treaty if China continues its development of the Spratly islands? And would the US respond? The answer so far is a resounding…silence. No one wants to say, because no one wants to draw that big red line when China shows no signs of abiding by it.

If there is a point of moderation in this potential conflict, it’s that Philippine President Rodrigo Duterte is interested in reviving flagging Sino-Filippino relations, but even there he’s hamstrung by his own population. A 2014 Pew poll found fully 93% of Filippinos are worried about China’s encroachment on the South China Sea and the possibility of military conflict.

And now that Prime Minister Abe’s coalition has just achieved the supermajority it needs to amend the constitution, many are worried that Japan is about to remove the mask of pacificism and convert its “Self-Defense Force” into the military threat it really is. Such a move would only add more fuel to the fire of military tension between Japan and its regional rival.

So just in case you’ve forgotten about the Asia-Pacific in the 24/7 news cycle of trauma we’ve been experiencing lately, don’t fret; it’s still there, and it’s still a tinderbox. Let’s just hope no one lights the match.

The United States, as part of its stated agenda of raising tensions in the South China Sea to encourage cooperation across Southeast Asia with the US in encircling and containing Beijing’s regional and global rise, has included several high-profile naval and aviation incidents. However, there is a legal battle lurking just behind these more spectacular headlines, and once again the United Nations is being brought in and undermined in the process.

China said on Saturday that it would ignore the decision of an international arbitration panel in a Philippine lawsuit against Beijing’s sweeping territorial claims in the South China Sea.

“To put it simply, the arbitration case actually has gone beyond the jurisdiction” of a UN arbitration panel, said Rear Adm Guan Youfei, director of the foreign affairs office of China’s National Defence Ministry.

The Philippines has filed a case in the United Nations under the UN Convention on Law of the Sea, questioning China’s territorial claim. An arbitration panel is expected to rule on the case soon. The Permanent Court of Arbitration ruled last year that it has jurisdiction over the case despite China’s rejection.

While the Associated Press portrays the lawsuit as “Philippine,” it is in reality headed not by the Philippines, but by a US legal team led by Paul S. Reichler of the Boston-based law firm Foley Hoag. Inquirer.net in an article titled, “US lawyer for PH expert in maritime boundary cases,” would reveal that not a single lawyer representing the Philippines is actually Filipino:

The lawyer leading the Philippine team in its fierce legal battle against China belongs to a select group of elite lawyers with extensive experience in representing sovereign states before the International Tribunal on the Law of the Sea (Itlos) in Hamburg, Germany, according to Chambers Global, which ranks law firms and lawyers across the world.

Paul Reichler of the Boston-based law firm Foley Hoag has specialized for more than 25 years in land and maritime boundary disputes, the law firm said on its website.

Reichler works with four other lawyers from the United States and the United Kingdom, in arguing the country’s case before the UN arbitral tribunal in The Hague, The Netherlands.

Foley Hoag represents the most powerful corporate-financier interests on Earth, and is an integral part of expanding their power and influence across the globe. That Foley Hoag is involved in Washington’s goal of encircling and containing one of the greatest threats to Washington and Wall Street’s hegemony not only in Asia, but globally, is no surprise.

Part of America’s agenda in the South China Sea is to provoke and then portray tensions in the region as being solely between China and its neighbors, with the United States feigning the role as peacekeeper – thus justifying its continued military, political, and economic “primacy” over Asia.

Such an appraisal is hardly conjecture. The corporate-financier funded and directed policy think tank, the Council on Foreign Relations (CFR) published a paper titled, “Revising U.S. Grand Strategy Toward China,” penned by Robert Blackwill – a Bush-era administrator and lobbyist who has directly participated in Washington’s attempts to maintain hegemony over Asia.

Blackwill’s paper states (emphasis added):

Because the American effort to ‘integrate’ China into the liberal international order has now generated new threats to U.S. primacy in Asia—and could result in a consequential challenge to American power globally—Washington needs a new grand strategy toward China that centers on balancing the rise of Chinese power rather than continuing to assist its ascendancy.

Indeed, a US policymaker openly admits that the US perceives itself as possessing and seeking to maintain “primacy in Asia,” primacy being defined by Merriam-Webster as, “the state of being most important or strongest.”

The United States then, literally an ocean away from Asia, presumes “primacy” over an entire region of the planet, and is openly seeking to deny the very nations within that region “primacy” over their own destiny, peoples, and resources.

It is an open, modern proclamation of imperialism.

It is also the true reality that underlines US foreign policy in the South China Sea and explains why an American and British, not a Philippine legal team has spent years trying to exact a ruling from the UN and other “international” organizations regarding Beijing.

In this context, it is quite clear why Beijing plans to ignore the ruling.

However, China’s ignoring the ruling was already considered by US policymakers and the US law firm “representing” the Philippines.

In more than 95% of international cases — litigation and arbitration before various international courts and tribunals — the states comply with the judgment, even if they are unhappy with it. There are at least two reasons for this. First is reputation and the influence that comes with it. The second reason is that many states understand it is to their advantage, and the advantage of others, to live in a rules-based system. Now, in the case of China, we see a country that is a great power that wishes to project its influence across the international community. China also advertises itself as the anti-imperialist great power, in contrast to the U.S., Russia and others. Think of the economic advantages that will accrue to the richest and most powerful nation in the region if these disputes are resolved and investment in resource extraction from the South China Sea begins.

Unfortunately for Reichler, Foley Hoag, and the US-dominated “rules-based system” China is expected to comply with, too many examples of this system’s abuse in recent years has preceded the ruling against China. The UN’s role in the invasion, occupation, and destruction of Afghanistan, Iraq, and Libya are perhaps the most extreme examples, with the UN’s complicity (either directly or through inaction) in the destruction of Syria and Ukraine, and sanctions leveled against Iran and others other examples of the UN simply being used to enable Western geopolitical ambitions and justify Western military, socioeconomic, and political aggression across the globe.

The true foundation of Wall Street and Washington’s “international order” is clearly, “might makes right.” For Beijing and its expanding military presence in the South China Sea and its attempts to circumvent “international” arbiters in favor of bilateral talks with nations being pressured by the West to confront Beijing, appears not only to be China’s strategy of choice, but a strategy that is incrementally drawing out Washington’s true agenda in the region and making it increasingly complicated for complicit governments in Asia to continue their cooperation with the West.

Whether or not Washington’s necessity to exert increasing pressure on governments across the region to toe the line in America’s proxy war against Beijing will finally force Asian governments to abandon this risky and costly game remains to be seen. But Beijing is playing a game with home-field advantage – building military capabilities that are backed by logistical networks leading back to the mainland that will match and inevitably exceed US capabilities in the region.

Avoiding a rush to conflict with the United States as Japan mistakenly did in the lead up to World War II will ensure China sustainably creates and expands a deterrence that will first ward off US attempts to maintain or expand primacy across the region before finally rolling US primacy back altogether. For the rest of Asia, it is paramount that they themselves create a regional balance of power predicated on military deterrence coupled with economic cooperation, that excludes attempts by the US to create conflict that will cost the entire region peace, stability, and most importantly, prosperity.

The Straits Times published an opinion piece by the London-based Rob Edens. Wishfully titled, “South-east Asia fast becoming unfriendly territory for China,” it attempts to portray Southeast Asia as increasingly pivoting West toward Washington, coincidentally just as Washington was “pivoting” East toward Asia.

Edens attempts to outline Beijing and Washington’s respective strategies in the region by stating:

On the one hand, China’s “One Belt One Road” initiative, for instance, is focused on physical infrastructure; improving road, rail and air networks overland between neighbouring states as a means to oil the cogs of commerce and bring new customers into China’s fold. On the other hand, the US-led Trans Pacific Partnership (TPP) maintains a discourse of freer trade in the Pacific region, opening up new markets overseas by relaxing tariffs and increasing various standards relating to the process of manufacture.

Lost on Edens appears to be the fact that physical infrastructure built beyond China’s borders becomes a long-term asset for those who cooperate in its construction, while Western “free trade” is in all reality submission to foreign economic hegemony. Many aspects of “free trade” agreements are, in fact, stripped verbatim from treaties that defined Colonial Europe and its subjugation of Southeast Asia.

“Free Trade” is Code for Economic Hegemony

Edens seems to believe that “free trade” is a viable incentive to lure Southeast Asia away from China. However, upon historical examination, it is more a means to coerce it away.

Thailand in the 1800s, then the Kingdom of Siam, was surrounded on all sides by colonized nations. Gunboats would eventually turn up off the coast of Siam’s capital and the Kingdom made to concede to the British 1855 Bowring Treaty. Upon examining these terms imposed via “gunboat policy,” how many of them echo verbatim the terms found among modern “free trade” economic liberalization?

Siam granted extraterritoriality to British subjects.

British could trade freely in all seaports and reside permanently in Bangkok.

British could buy and rent property in Bangkok.

British subjects could travel freely in the interior with passes provided by the consul.

Import and export duties were capped at 3%, except the duty-free opium and bullion.

British merchants were to be allowed to buy and sell directly with individual Siamese.

Compared to modern-day examples of “free trade,” and in Iraq’s case, free trade imposed once again by the barrel of a gun, it is nearly impossible to distinguish any difference.

Iraq is a perfect modern-day example of a nation overrun by brute force and made to concede to an entire restructuring of its economy, giving foreign powers not only access to their natural resources, markets, and population, but uncontested domination over them as well. It was absolute subjugation, both militarily and economically. It was modern-day conquest. And it is something Washington seeks to repeat elsewhere, including Southeast Asia.

It’s America’s “Island Dispute” with China, Not Southeast Asia’s

Edens would continue claiming:

However, regional attitudes are changing, largely as a result of the bullish stance China has taken in recent years over territorial disputes. The nations of South-east Asia are increasingly reluctant to accept any threats to their sovereignty in the form of Beijing’s repeated incursions into their exclusive economic zones.

However, it should be noted that the US itself in its own policy papers has noted that these “disputes” are being intentionally provoked by Washington itself, often with ambassadors and envoys repeatedly finding themselves attempting to pressure nations across Southeast Asia to “join” the dispute. The goal of using Southeast Asia as a collective Western-dominated bloc to encircle and contain China with has been stated US policy since the release of the Pentagon Papers in 1971.

A relatively recent example of this can be seen when US Ambassador to Thailand Glyn Davies berated the Thai government for not “adding its voice” to calls for China to “peacefully resolve conflicts over its appropriation of islands in the South China Sea.” Similar messages and accompanying political and economic threats, have been delivered to other capitals across Southeast Asia.

Edens doesn’t seem to understand that what he is watching is a dispute created by Washington, and a confrontational reaction from across Southeast Asia extorted out of each respective nation by Washington.

Edens mentions the Philippines and their legal dispute with China brought before the Hague. He fails to mention that the legal team representing the Philippines is in fact headed by Washington-based law firm Foley Hoag and that their representative is in fact an American.

The Philippines — represented by an American lawyer, Paul Reichler, of the Washington law firm Foley Hoag — contends that it has the right to exploit oil and gas in waters in a 200-nautical-mile exclusive economic zone extending from territory that it claims in the South China Sea.

Dangling the spoils of victory over the government in Manila – in this case, oil – along with less public threats over what will happen if Manila does not cooperate, is likely what has caused the Philippines to squander diplomatic currency with Beijing, money in unnecessary military expenditures, and both time and energy that could be better spent invested in its own future in Asia Pacific, rather than Washington’s.

Nations Not Cooperating Will Suffer Washington’s Wrath

Edens then turns his attention toward Thailand, claiming:

In the grip of a military junta since last year, the former Land of Smiles is slowly being turned into some southern version of a North Korea.

One might forgive the London-based writer for thinking so, apparently having never set foot in Thailand before or after the coup, and apparently only reading what he sees in the British papers.

In reality, up to and including the day before the coup, US-backed dictator Thaksin Shinawatra was mass murdering his opponents in the streets with a paramilitary political front known as the “red shirts,” all while building a hereditary dictatorship that saw not only himself as prime minister, but also his brother-in-law and sister as well.

More relevant is the fact that during Shinawatra’s decade-plus grip on power, he capitulated to every demand made by Washington, including sending troops to Iraq, hosting the CIA’s abhorrent rendition program, and attempting to illegally pass a US-Thai free trade agreement without parliamentary approval.

Since Shinawatra’s ouster from power in 2006, and more recently his sister’s ouster from power in 2014, he and his political dynasty have received unswerving support from the West, seeking to undermine Thailand’s existing political institutions, and reinstall the Shinawatras back into power.

These facts are never mentioned by Edens, nor is it explained how Thailand is being turned into “North Korea” by the military simply for intervening and putting a stop to obvious abuses of both power and human rights, or subsequently arresting members of this political group – a group that has employed terrorism and pursued open, armed insurrection.

Edens is making it clear, intentionally or not, that nations failing to heed the demands of Washington will be isolated and undermined, rhetorically, politically, economically, and even militarily, just as it is doing to China.

China Seeks Collaborators, Washington Seeks Colonies

Edens claims that Thailand has become a “prime breeding ground for Chinese foreign policy.” In some respects that is true. Thailand seeks a regional partner, not a foreign master. China has not placed any preconditions on Thailand regarding its internal politics in exchange for regional political and military cooperation or joint economic expansion.

In reality, it is likely Southeast Asia collectively prefers this arrangement with Beijing, over the preconditions and client regime status mandated by Washington. What Edens and others in the West attempt to hold up as “evidence” of growing tension in Southeast Asia is more likely the result of backdoor meetings and insinuated threats prodding weaker capitals in the region continuously toward wider confrontation with China. However, none of this is sustainable.

Even as Edens and others hold up evidence that their strategy of tension is working, those on the ground in Southeast Asia can see the waning influence of the West, increasing awareness of the poorly hidden coercion used by the West to cling to the influence it has remaining, and the slow and steady influence of China.

China is a regional neighbor, unlike Washington who attempts to impose its agenda from the other side of the planet. China benefits from a stronger Asia, while Washington sees any rising power or region as a threat that must be controlled, and failing that, divided and destroyed.

It would be wrong to say the rest of Asia is not watching China’s rise with caution. It would also be wrong to say that China does not possess the potential to some day equal or exceed the unwarranted power and influence Washington has wielded in the region. But it would be equally wrong to say that Asia prefers very real Western subjugation to a potential Chinese variety. It seeks a multipolar region where all nations rise together and a balance of power and a respect for national sovereignty is maintained. That is a balance collaboration with the West simply will not yield.

So despite Edens optimistically claiming the “ball” is “squarely in Washington’s court,” the truth is after centuries of the West using and abusing Asia, Asia now is using the West, to raise itself up before pushing it out.

Back in 2014, civil liberties and privacy advocates were up in arms when the government tried to quietly push through the Cybersecurity Information Sharing Act, or CISA, a law which would allow federal agencies – including the NSA – to share cybersecurity, and really any information with private corporations “notwithstanding any other provision of law.” The most vocal complaint involved CISA’s information-sharing channel, which was ostensibly created for responding quickly to hacks and breaches, and which provided a loophole in privacy laws that enabled intelligence and law enforcement surveillance without a warrant.

Ironically, in its earlier version, CISA had drawn the opposition of tech firms including Apple, Twitter, Reddit, as well as the Business Software Alliance, the Computer and Communications Industry Association and many others including countless politicians and, most amusingly, the White House itself.

In April, a coalition of 55 civil liberties groups and security experts signed onto an open letter opposing it. In July, the Department of Homeland Security itself warned that the bill could overwhelm the agency with data of “dubious value” at the same time as it “sweep[s] away privacy protections.” Most notably, the biggest aggregator of online private content, Facebook, vehemently opposed the legislation however a month ago it was “surprisingly” revealed that Zuckerberg had been quietly on the side of the NSA all along as we reported in “Facebook Caught Secretly Lobbying For Privacy-Destroying “Cyber-Security” Bill.”

Following the blitz response, the push to pass CISA was tabled following a White House threat to veto similar legislation. Then, quietly, CISA reemerged after the same White House mysteriously flip-flopped, expressed its support for precisely the same bill in August.

And then the masks fell off, when it became obvious that not only are corporations eager to pass CISA despite their previous outcry, but that they have both the White House and Congress in their pocket.

As Wired reminds us, when the Senate passed the Cybersecurity Information Sharing Act by a vote of 74 to 21 in October, privacy advocates were again “aghast” that the key portions of the law were left intact which they said make it more amenable to surveillance than actual security, claiming that Congress has quietly stripped out “even more of its remaining privacy protections.”

“They took a bad bill, and they made it worse,” says Robyn Greene, policy counsel for the Open Technology Institute.

But while Congress was preparing a second assault on privacy, it needed a Trojan Horse with which to enact the proposed legislation into law without the public having the ability to reject it.

It found just that by attaching it to the Omnibus $1.1 trillion Spending Bill, which passed the House early this morning, passed the Senate moments ago and will be signed into law by the president in the coming hours.

In a late-night session of Congress, House Speaker Paul Ryan announced a new version of the “omnibus” bill, a massive piece of legislation that deals with much of the federal government’s funding. It now includes a version of CISA as well. Lumping CISA in with the omnibus bill further reduces any chance for debate over its surveillance-friendly provisions, or a White House veto. And the latest version actually chips away even further at the remaining personal information protections that privacy advocates had fought for in the version of the bill that passed the Senate.

It gets: it appears that while CISA was on hiatus, US lawmakers – working under the direction of corporations adnt the NSA – were seeking to weaponize the revised legislation, and as Wired says, the latest version of the bill appended to the omnibus legislation seems to exacerbate the problem of personal information protections.

It creates the ability for the president to set up “portals” for agencies like the FBI and the Office of the Director of National Intelligence, so that companies hand information directly to law enforcement and intelligence agencies instead of to the Department of Homeland Security. And it also changes when information shared for cybersecurity reasons can be used for law enforcement investigations. The earlier bill had only allowed that backchannel use of the data for law enforcement in cases of “imminent threats,” while the new bill requires just a “specific threat,” potentially allowing the search of the data for any specific terms regardless of timeliness.

Some, like Senator Ron Wyden, spoke out out against the changes to the bill in a press statement, writing they’d worsened a bill he already opposed as a surveillance bill in the guise of cybersecurity protections.

Senator Richard Burr, who had introduced the earlier version of bill, didn’t immediately respond to a request for comment.

“Americans deserve policies that protect both their security and their liberty,” he wrote. “This bill fails on both counts.”

Why was the CISA included in the omnibus package, which just passed both the House and the Senate? Because any “nay” votes – or an Obama – would also threaten the entire budget of the federal government. In other words, it was a question of either Americans keeping their privacy or halting the funding of the US government, in effect bankrupting the nation.

And best of all, the rushed bill means there will be no debate.

The bottom line as OTI’s Robyn Green said, “They’ve got this bill that’s kicked around for years and had been too controversial to pass, so they’ve seen an opportunity to push it through without debate. And they’re taking that opportunity.”

The punchline: “They’re kind of pulling a Patriot Act.”

And when Obama signs the $1.1 trillion Spending Bill in a few hours, as he will, it will be official: the second Patriot Act will be the law, and with it what little online privacy US citizens may enjoy, will be gone.

On Tuesday evening, we asked what would happen if emerging markets joined China in dumping US Treasurys. For months we’ve documented the PBoC’s liquidation of its vast stack of US paper. Back in July for instance, we noted that China had dumped a record $143 billion in US Treasurys in three months via Belgium, leaving Goldman speechless for once.

We followed all of this up this week by noting that thanks to the new FX regime (which, in theory anyway, should have required less intervention), China has likely sold somewhere on the order of $100 billion in US Treasurys in the past two weeks alone in open FX ops to steady the yuan. Put simply, as part of China’s devaluation and subsequent attempts to contain said devaluation, China has been purging an epic amount of Treasurys.

But even as the cat was out of the bag for Zero Hedge readers and even as, to mix colorful escape metaphors, the genie has been out of the bottle since mid-August for China which, thanks to a steadfast refusal to just float the yuan and be done with it, will have to continue selling USTs by the hundreds of billions, the world at large was slow to wake up to what China’s FX interventions actually implied until Wednesday when two things happened: i) Bloomberg, citing fixed income desks in New York, noted “substantial selling pressure” in long-term USTs emanating from somebody in the “Far East”, and ii) Bill Gross asked, in a tweet, if China was selling Treasurys.

Sure enough, on Thursday we got confirmation of what we’ve been detailing exhaustively for months. Here’s Bloomberg:

China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.

Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales, said another person. They didn’t reveal the size of the disposals.

The latest available Treasury data and estimates by strategists suggest that China controls $1.48 trillion of U.S. government debt, according to data compiled by Bloomberg. That includes about $200 billion held through Belgium, which Nomura Holdings Inc. says is home to Chinese custodial accounts.

The PBOC has sold at least $106 billion of reserve assets in the last two weeks, including Treasuries, according to an estimate from Societe Generale SA. The figure was based on the bank’s calculation of how much liquidity will be added to China’s financial system through Tuesday’s reduction of interest rates and lenders’ reserve-requirement ratios. The assumption is that the central bank aims to replenish the funds it drained when it bought yuan to stabilize the currency.

Now that what has been glaringly obvious for at least six months has been given the official mainstream stamp of fact-based approval, the all-clear has been given for rampant speculation on what exactly this means for US monetary policy. Here’s Bloomberg again:

China selling Treasuries is “not a surprise, but possibly something which people haven’t fully priced in,” said Owen Callan, a Dublin-based fixed-income strategist at Cantor Fitzgerald LP. “It would change the outlook on Treasuries quite a bit if you started to price in a fairly large liquidation of their reserves over the next six months or so as they manage the yuan to whatever level they have in mind.”

“By selling Treasuries to defend the renminbi, they’re preventing Treasury yields from going lower despite the fact that we’ve seen a sharp drop in the stock market,” David Woo, head of global rates and currencies research at Bank of America Corp., said on Bloomberg Television on Wednesday. “China has a direct impact on global markets through U.S. rates.”

As we discussed on Wednesday evening, we do, thanks to a review of the extant academic literature undertaken by Citi, have an idea of what foreign FX reserve liquidation means for USTs. “Suppose EM and developing countries, which hold $5491 bn in reserves, reduce holdings by 10% over one year – this amounts to 3.07% of US GDP and means 10yr Treasury yields rates rise by a mammoth 108bp ,” Citi said, in a note dated earlier this week.

In other words, for every $500 billion in liquidated Chinese FX reserves, there’s an attendant 108bps worth of upward pressure on the 10Y. Bear in mind here that thanks to the threat of a looming Fed rate hike and a litany of other factors including plunging commodity prices and idiosyncratic political risks, EM currencies are in free fall which means that it’s not just China that’s in the process of liquidating USD assets.

The clear takeaway is that there’s a substantial amount of upward pressure building for UST yields and that is a decisively undesirable situation for the Fed to find itself in going into September. On Wednesday we summed the situation up as follows: “one of the catalysts for the EM outflows is the looming Fed hike which, when taken together with the above, means that if the FOMC raises rates, they will almost surely accelerate the pressure on EM, triggering further FX reserve drawdowns (i.e. UST dumping), resulting in substantial upward pressure on yields and prompting an immediate policy reversal and perhaps even QE4.”

Well now that China’s UST liquidation frenzy has reached a pace where it could no longer be swept under the rug and/or played down as inconsequential, and now that Bill Dudley has officially opened the door for “additional quantitative easing”, it would appear that the only way to prevent China and EM UST liquidation from, as Citi puts it, “choking off the US housing market,” and exerting a kind of forced tightening via the UST transmission channel, will be for the FOMC to usher in QE4.

First, Clark cites people who lose a job or break up with a girlfriend as being especially dangerous. Next he tells us what he’d do to those who’re disloyal to the U.S. during the war on terror.

“In World War II, if someone supported Nazi Germany at the expense of the United States, we didn’t say that was freedom of speech. We put them in a camp,” Clark continued, “They were prisoners of war.””If these people are radicalized, and they don’t support the United States, and they’re disloyal to the United States, as a matter of principle, fine, that’s their right, but it’s our (the government’s) right and our obligation to segregate them from the normal community for the duration of the conflict. And I think we’re going to have to get increasingly get tough on this.”

Initial security reports suggested that China had crippled the services by exploiting its own Internet filter — known as the Great Firewall — to redirect overwhelming amounts of traffic to its targets. Now, researchers at the University of California, Berkeley and the University of Toronto say China did not use the Great Firewall after all, but rather a powerful new weapon that they are calling the Great Cannon.

The Great Cannon, the researchers said in a report published on Friday, allows China to intercept foreign web traffic as it flows to Chinese websites, inject malicious code and repurpose the traffic as Beijing sees fit.

The system was used, they said, to intercept web and advertising traffic intended for Baidu — China’s biggest search engine company — and fire it at GitHub, a popular site for programmers, and GreatFire.org, a nonprofit that runs mirror images of sites that are blocked inside China. The attacks against the services continued on Thursday, the researchers said, even though both sites appeared to be operating normally.

Photo

Bill Marczak, right, a co-author of the report on a powerful new Chinese cyberweapon, with Morgan Marquis-Boire, a fellow Citizen Lab researcher.Credit Thor Swift for The New York Times

But the researchers suggested that the system could have more powerful capabilities. With a few tweaks, the Great Cannon could be used to spy on anyone who happens to fetch content hosted on a Chinese computer, even by visiting a non-Chinese website that contains Chinese advertising content.

“The operational deployment of the Great Cannon represents a significant escalation in state-level information control,” the researchers said in their report. It is, they said, “the normalization of widespread and public use of an attack tool to enforce censorship.”

The researchers, who have previously done extensive research into government surveillance tools, found that while the infrastructure and code for the attacks bear similarities to the Great Firewall, the attacks came from a separate device. The device has the ability not only to snoop on Internet traffic but also to alter the traffic and direct it — on a giant scale — to any website, in what is called a “man in the middle attack.”

China’s new Internet weapon, the report says, is similar to one developed and used by the National Security Agency and its British counterpart, GCHQ, a system outlined in classified documents leaked by Edward J. Snowden, the former United States intelligence contractor. The American system, according to the documents, which were published by The Intercept, can deploy a system of programs that can intercept web traffic on a mass scale and redirect it to a site of their choosing. The N.S.A. and its partners appear to use the programs for targeted surveillance, whereas China appears to use the Great Cannon for an aggressive form of censorship.

The similarities of the programs may put American officials on awkward footing, the researchers argue in their report. “This precedent will make it difficult for Western governments to credibly complain about others utilizing similar techniques,” they write.

Still, the Chinese program illustrates how far officials in Beijing are willing to go to censor Internet content they deem hostile. “This is just one part of President Xi Jinping’s push to gain tighter control over the Internet and remove any challenges to the party,” said James A. Lewis, a security expert at the Center for Strategic Studies in Washington.

Beijing continues to increase its censorship efforts under its State Internet Information Office, an office created under Mr. Xi to gain tighter control over the Internet within the country and to clamp down on online activism. In a series of recent statements, Lu Wei, China’s Internet czar, has called on the international community to respect China’s Internet policies.

Sarah McKune, a senior legal adviser at the Citizen Lab at the Munk School of Global Affairs at the University of Toronto and a co-author of the report, said, “The position of the Chinese government is that efforts to serve what it views as hostile content inside China’s borders is a hostile and provocative act that is a threat to its regime stability and ultimately its national security.”

The attacks also show the extent to which Beijing is willing to sacrifice other national goals, even economic ones, in the name of censorship. Baidu is China’s most visited site, receiving an estimated 5.2 million unique visitors from the United States in the last 30 days, according to Alexa, a web ranking service.

Kaiser Kuo, a Baidu spokesman, said that Baidu was not complicit in the attacks and that its own networks had not been breached. But by sweeping up Baidu’s would-be visitors in its attacks, researchers and foreign policy experts say, Beijing could harm the company’s reputation and market share overseas.

Beijing has recently said that it plans to help Chinese Internet companies extend their influence and customer base abroad. At a meeting of the National People’s Congress in China last month, Premier Li Keqiang announced a new “Internet Plus” action plan to “encourage the healthy development of e-commerce, industrial networks and Internet banking and to guide Internet-based companies to increase their presence in the international market.”

Yet the latest censorship offensive could become a major problem for Chinese companies looking to expand overseas. “They know one of their biggest obstacles is the perception that they are tools of the Chinese government,” Mr. Lewis said. “This is going to hurt Baidu’s chances of becoming a global competitor.”

Researchers say they were able to trace the Great Cannon to the same physical Internet link as China’s Great Firewall and found similarities in the source code of the two initiatives, suggesting that the same authority that operates the Great Firewall is also behind the new weapon.

“Because both the Great Cannon and Great Firewall are operating on the same physical link, we believe they are both being run under the same authority,” said Bill Marczak, a co-author of the report who is a computer science graduate student at the University of California, Berkeley and a research fellow at Citizen Lab.

Mr. Marczak said researchers’ fear is that the state could use its new weapon to attack Internet users, particularly dissidents, without their knowledge. If they make a single request to a server inside China or even visit a non-Chinese website that contains an ad from a Chinese server, the Great Cannon could infect their web communications and those of everyone they communicate with and spy on them.

Ultimately, researchers say, the only way for Internet users and companies to protect themselves will be to encrypt their Internet traffic so that it cannot be intercepted and diverted as it travels to its intended target.

“Put bluntly,” the researchers said, “unprotected traffic is not just an opportunity for espionage but a potential attack vector.”

China’s Ambassador to Belgium (which has the capital of the EU) said that the “nature and root cause” of the Ukrainian conflict is “the West,” and that “The West should abandon the zero-sum mentality, and take the real security concerns of Russia into consideration.”

By “real security concerns,” he is clearly referring to NATO’s expansion right up to Russia’s border, and America’s surrounding Russia with U.S. military bases, now inceasingly including the most strategic of Russia’s bordering countries: Ukraine.

In other words, this diplomat says: “the West” has a “zero-sum” attitude toward Russia, instead of seeking to move forward with an approach in which neither side among the nuclear superpowers benefits at the other’s expense — the entire world moves forward together.

This is a direct criticism of Barack Obama, and of all of the pro-Obama, anti-Putin, EU leaders.

It’s also an implicit repudiation of Obama’s having repeatedly referred to the U.S. as “the one indispensable nation.” (Another example of that phrase is here.) Obama keeps saying: every other nation, except the U.S., is “dispensable.” He clearly thinks that Russia is.

That’s not merely an insult: it’s an act of provocation; it is virtually asking for a fight. And all for what? For whose nuclear char?

This criticism of the aggressive nationalist Obama does not come from China’s top leadership, but it would not have come at all if they had not approved of it in advance.

China thus now tells Obama: Stop it. Stop it in word, and in deed.

Implicitly, China is also telling Obama: China is not dispensable, either. In fact, the entire mentality, which Obama embodies, is not just callous and insulting; it’s dangerous.

Like President G.W. Bush, Obama is increasingly an embarassment to his country.

Shortly before Obama’s coup in Ukraine, Gallup International issued, on 30 December 2013, a poll of 65 countries, which found that:

“The US was the overwhelming choice (24% of respondents) for the country that represents the greatest threat to peace in the world today. This was followed by Pakistan (8%), China (6%), North Korea, Israel and Iran (5%). Respondents in Russia (54%), China (49%) and Bosnia (49%) were the most fearful of the US as a threat.”

When the U.S. Government is hankering for a war with the only other nuclear superpower, such findings certainly make sense. And the 54% of Russians who cited the U.S. as the greatest threat to peace would probably be far higher today. But Gallup International didn’t publish any update on that poll-question, perhaps because the original financial backer (which was unnamed) wouldn’t fund it.

Already, the finding was bad enough. But Obama keeps calling the U.S. “the one indispensable nation in the world.” He keeps telling other nations: you are dispensable. He keeps rubbing it in — not the fact, but his own nationalism.

It reminds some people of Mussolini, and of Hitler. But Obama pretends to be a democrat, not a fascist.

Maybe he’s just a bigger liar than they were. Maybe that’s what he is so arrogant about: his terrific ability to deceive.

After all, he won the 2009 Nobel Peace Prize for it: for lying. For misrepresenting himself as being progressive, instead of regressive.

Well, now: anyone who doesn’t know the reality is deluded by propaganda — and it’s not coming from Russia, nor from China. It’s coming from their own nation’s ‘news’ media.

Which heads-of-state want to be publicly associated with a foreign leader like that, one who tells the given leader’s public: your nation is dispensable. Fools. Only fools.

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